A Panel Granger Causality Test of Investment in ICT Capital and Economic Growth: Evidence From Developed and Developing Countries

Abstract

This paper applies the Pairwise Panel Granger Causality test to examine the relationship between ICT (information and communication technology) expenditure and the rate of growth of GDP (gross domestic product) per capita. This is accomplished by using cross-country time-series data for a total of 70 developed and developing countries for the period from 2003 to 2008. The study reveals that the existence of causality and its direction differ across different income-group of countries and over the number of lags included. ICT investment expenditure as a percentage of GDP appears to cause the rate of growth of GDP per capita for the high income group and all income groups combined with lags higher than one year. However, for the upper-and lower-middle income groups, the study detects causality in neither direction. Also, when only one lag is included, the study suggests no causality in either direction for any of the income-groups of countries.Keywords: investment in ICT (information and communication technology), the rate of growth of GDP (gross domestic product) per capita, causality, developed countries, developing countries

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